Monday, February 6, 2012

Canada’s equalization system unconstitutional, Study finds

An equalization expert, Peter Gusen said in a new study that Canada’s equalization system is unconstitutional. His 41-page paper, according to the Toronto Star, will be released Monday by the Mowat Centre for Policy Innovation at the University of Toronto.

According to Gusen, “If equalization continues to ignore differences in expenditure need it will not be treating provinces fairly and it will not be fulfilling its constitutional mandate.”

If “need” were factored into the equalization formula, the study suggests, Ontario’s share would have been $822-million more from Ottawa’s taxpayer-funded $15.4-billion pool in 2008-09; British Columbia would have received an additional $879-million. Apparently, even Alberta, Saskatchewan and Newfoundland would have been richer by $526-million, $332-million and $310-million respectively. The big loser would have been Quebec, which would have received $3.11-billion less that year.

Quebec gets twice Ontario’s payout: $7.6-billion versus $3.7-billion, and is by far the largest equalization recipient. The current system does seem to lack basic fairness, doesn’t it? And, especially, when considering Quebec is providing its residents $7-a-day childcare, something unheard of in Ontario.

Very worrying too is this Toronto Star report:

“Gusen is former director of federal-provincial relations at the federal finance department and the author of Ottawa’s 2006 equalization study that the government tried to suppress with 27 redactions in 67 pages.”

Ontario’s Finance Minister Dwight Duncan was understandably furious when he found out that Gusen’s earlier report had revealed that in the late 1990s and the early 2000s Ontario was short-changed by $4.56-billion while Quebec was over-funded by $6.39-billion to provide the same level of services.

I suppose one might write this discrepancy off to the cost of having a united Canada. And it could very well be that, on balance, it’s worth it.

It does seem to me, however, that our government needs to be more frank with the rest of Canada about its strategy regarding equalization payments, and tell us why Quebec receives so much more than it apparently needs.

© 2012 Russell G. Campbell


  1. It isn't so much that equalization is in itself unconstitutional, in fact it is in the 1982 Constitution Act (Sec 36) itself, but rather that the distributing formula is in fact unfair.

    However, there is something that needs to be said with regards to equalization, something I feel isn't said enough: it is not one or a group of provinces subsidizing the others. It is paid out of the federal treasury, to which residents of all provinces contribute.

    Québec, though much maligned in the media for the bias of the formula in it's favour, pays the second-largest chunk of Ottawa's tax revenue (for comparisans, Ontario is first and Alberta is third), so it is not like the province is recieving a freebie.

    I must confess that I really hate how the media spreads blatant lies about who gets what. It is clearly a cynical ploy of divide-and-rule by the political elite, to the great detriment of this country.